When Will Artists Earn More Than 12 Percent of $43 Billion the Music Industry Generates Per Year?

Music fans in the U.S. are spending more money on music today than ever, approximately $20 billion a year. Meanwhile, total music revenues (including concerts and merch) have jumped to $43 billion annually. Of that, artists are earning just a mere 12 percent, about $5 billion, reveals a new report from Citigroup. The investment bank corporation conducted the study to determine how money flows from consumers to music related companies, labels and musicians in an age of digital streaming.

The $43 billion figure was calculated from total music revenues, including live shows, on-demand streams, CD sales, radio play and advertising, reports Rolling Stone. The mammoth gulf between how much comes in from musicians and what they actually receive is due to what Citibank terms "value leakage" that takes place in the production and distribution of music. This includes the high costs of running record companies, streaming organizations, satellite radio and other entities that are integral to providing consumers with music.

“When you end up tracing all the dollars, around 10 percent of it gets captured by the artist. That’s amazingly low,” the report's co-author, Citigroup’s media, cable and satellite researcher Jason Bazinet told Rolling Stone. “There’s an unbelievable amount of leakage through the whole business.”

The 80-page report, however, indicates that over time artists will likely receive a greater share of the profits through higher touring percentages and by self-releasing music rather going through a record label. In fact, as bleak as the landscape looks, musicians are already earning more than they used to. For example, in 2000, artists took in just seven percent of the money their music earned, but that was at a time when CD sales were far higher than they are today.

Citi also believes that the structure of the music industry will evolve in the coming years as more companies consolidate and become music-media corporations capable of offering musicians better contracts, Rolling Stone reports.

By vertically integrating, you can manufacture a star," Bazinet told RS. "That’s something the record labels can’t do. “The spending patterns have changed. The industry hasn’t yet reacted. That’s the next chapter.”